I've worked as either a journalist, editor or columnist for 16 years, first in the UK and now in the US, focusing on business, finance and the arts. This blog is about art, investing, and where those two worlds collide. Words I've put in a row have appeared on the BBC website and in the Financial Times, The Economist, Art + Auction Magazine, Worth Magazine and The Guardian, among others. I've written about everything from pension trusts for artists to art investment vacations, but also plenty of straight investment and personal finance articles on topics such as exchange traded funds and municipal bond funds, as well as general art and art business articles about artists, galleries and art communities. I also write about the market for other collectibles such as wine, photography, vintage cars, jewelry and furniture. You can find some of my other business, finance and arts articles, along with some travel and lifestyle pieces, on kathryntully.com. Follow me on twitter.com/KathrynTully or find me on Facebook at facebook.com/forbespriceless.

Is Your Art An Investment?

If you find yourself admiring art in galleries and auction catalogs and wondering how much more it will be worth in the future, it could be time to take stock.

After all, the art market can be a secretive and unfathomable place to do business, so successful art investment is never going to be easy.

But is it even possible? Some would argue that making an investment and buying art are two mutually exclusive activities, because the first process is objective, liquid, transparent and mathematical, while the second is subjective, illiquid, opaque and speculative.

The combination of these opposing worlds means that cringeworthy terms such as passion investments and treasure assets get banded about all over the place in discussions about investing in art or other collectibles. Yet it’s when the passion and fluffy feelings are dropped from descriptions of art investment altogether that it becomes misleading.

Even respectable art market publications have categorized some art as investment grade, suggesting that it’s possible to accurately quantify the risk in owning an art work, when of course it isn’t.

The fact that works by so-called blue chip artists such as Andy Warhol sell for stratospheric sums at auction on a relatively frequent basis is no indication that those prices are consistently achievable, even for the same sort of work by the same artist.

Back in 2008, for example, Andy Warhol’s Eight Elvises fetched $100 million in a private sale. So when Sotheby’s put Warhol’s Double Elvis [Ferus Type] silkscreen up for auction this May, one of only 22 Warhol Elvises in existence and the first time a Double Elvis had come to market since 1995, the auction house thought it would fetch up to $50 million.

It actually sold for $37 million. That’s not exactly shabby, but in truth, an Andy Warhol canvas is about as close to an investment-grade-rated security as Elvis was to health food.

Perhaps that is why many art buyers do not consider themselves to be art investors. Of the 2000 high net worth individuals around the world that Barclays surveyed for their June report Wealth Insights: Profit or Pleasure?, only 10% said they bought fine art pictures or paintings purely as an investment, while 69% believed that the financial value of art is driven by public taste, rather than its intrinsic worth.

Despite all these difficulties, art investment is a big business. Since 2008, a new generation of art investment funds have set up shop as the broader art market has recovered. Some of these funds even offer managed art accounts for individual investors. The number of art indices is also growing. In May, the art market data provider artnet launched the latest of these, focused on modern and contemporary art. Artnet’s objective is to increase price transparency in a market where that is in scant supply.

That’s a laudable goal, but do any of these initiatives really make art a viable investment or do they just add a veneer of financial respectability to a market that doesn’t support it? In this blog, I’ll be wading into the world of art investment, and the investment market for other collectibles such as antiques, jewelry, photography and fine wine, to try to find out.

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A compelling and informative blog. Perhaps Forbes could consider a regular financial index of art prices by asset class (photography, modern etc) with expert commentary on investment opportunities in this sector.

That would be great. Getting reliable data is tricky, though. Most art indices just track sales of art at auction, which is just one part of the overall market, and even then, don’t take into account art works that don’t sell. More on art indices soon!

The current market at the investment end feels very hedge fundy to me. Manipulating valuations? More celebrity ‘artist’ marketing to wanna be ‘celebrity buyers’. Can you feel the collusion? And then there is the very sexy game of Provenance and authenticity. I will be following, thanks Kathryn ; this blog can hunt

Thanks George. It’s pretty incredible when you think that the very top tier of the art market is dominated by around 40 powerful buyers. A very small group of people have a really disproportionate influence on what artists are considered the most popular and valuable today.

HI KATHRYN, (SORRY FOR THE CAPS BUT IT IS EASIER ON MY EYES) TRIED TO SEND A EMAIL BUT FAILED IN FINDING ONE FOR YOU. WE HAVE PUBLISHED THE MEI MOSES FAMILY OF ART INDEXES FOR THE LAST 10 YEARS. THEY ARE BASED ON TRANSPARENT AUCTION REPEAT SALES OF THE SAME OBJECT. WE HAVE OVER 30,000 PAIRS IN OUR DATABASE. ANALYSIS OF REPEAT SALE PAIRS ARE THE ONLY WAY YOU CAN KNOW WHAT TRUE RETURNS ARE AVAILABLE IN THE ART MARKET. WE BOTH ARE BASED IN NEW YORK. IF YOU WOULD LIKE TO KNOW MORE ABOUT OUR RESEARCH, WHICH HAS BEEN PUBLISHED IN LEADING ACADEMIC JOURNALS OF ECONOMICS AND FINANCE, VISIT OUR WEBSITE WWW.ARTASANASSET.COM OR BETTER YET GIVE ME A CALL 212 998 0290 OR SEND ME AN EMAIL, MMOSES@STERN.NYU.EDU, AND MAYBE WE COULD FIND A TIME TO CHAT OR VISIT AT THE STERN SCHOOL AT NYU. BEST, MIKE

Kathryn, I stumbled on your Blog when googling “art as investment” and decided I would like to join the conversation. Hope you don’t mind. I’d like to become a contributor but I’m pretty much “old school ” and have to feel my way along in the blogging business. I’m also opinionated about how to approach art as investment if you’re not a zillionaire with money to burn and a cadre of advisers at your elbow. There are objective ways to hedge art investments. The problem is the voices that command the art stage are much more concerned about the aesthetics and philosophy of art than the economics of it. We are not culturally oriented to view art as a commodity. Too bad.